Yale Economic Review

Articles

Vol. 7, No. 1, Winter

Internet Courses VS Classrom Courses
Over the last forty years, states have faced overwhelming debt loads, resulting in severe problems allocating adequate resources to their public universities. This increased strain has prompted growing support for internet-based instruction, but the...
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Determining an Income Tax System
When the United States' national debt is hovering around $14 trillion as it is today, sources of federal funding ought to be closely examined. From where and how should the government obtain funding? Naturally, economists have been closely scrutinizing...
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Are Free Trade Agreements Contagious!
Free trade agreements (FTAs) dominate today's global economy more than ever before, in recent years spreading like wildfire. But why the sharp rise? In their June 2010 paper entitled "Are Free Trade Agreements Contagious?" international economics professor...
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On Maiden Lane
The Pligh Federal ReserveIn the summer of 1931, as the economy descended deeper into depression, Irving Fisher pressed Eugene Meyer, a Federal Reserve Board Governor, to expand the money supply in order to stop the economy from deteriorating further....
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Financing New Businesses
Do you have a friend or family member who's thinking of starting a new business but isn't sure how to raise the capital to get started? Is he or she wondering whether possible sources of financing have been altered by the economic struggles of recent...
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Will the EU Survive Its Demographic Deficit?
The arrival of the 21st century signaled a significant turning point in the demographic makeup of the industrialized nations of Europe. At that time the EU population began to generate negative momentum: the number of children had dropped to a level...
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Change in the Right Direction
Why Ethanol Should Replace OilOver 5000 years ago, bronze served as a vital resource for agrarian civilizations. Not merely the material of shields and spears, bronze was made absolutely essential - and valuable - by its use in the production of agricultural...
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Ethanol
Ethanol has been increasingly dubbed as "The Great Green Hope" - the replacement of gasoline as a major fuel source. Although this relatively sustainable alternative may sound attractive, ethanol may actually be harmful and potentially ruin our cars...
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THE NUMBER THAT KILLED US: How the Mathematical Model Value at Risk Helped Cause the Credit Crisis
On September 10th, 2009 former trader and bestselling author Nassim Taleb did something that he very seldom does: he wore a tie. By so graphically breaking with a stubbornly held tradition, the Lebanese-American showed the world that it was a very special...
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Football Draft or Football Folly?
To supporters of the lowliest of National Football League, teams solace comes rarely. The expansion Tampa Bay Buccaneers of the late 1970s, who lost their first twenty-six games in the league, the 2008 Detroit Lions, who became the first team ever to...
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The Allure of Austerity: How Europe Became a Cheap Date and Why the United States Should Not Follow Her Lead
"You should ask a Swabian housewife. She would give us some short and correct advice, which would be this: cYou cannot live beyond your means in the long run.'"Although Angela Merkel was not in fact resigning the German chancellorship to become a hausefrau,...
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Problems Facing Our Energy Infrastructure
A Critical Look at the Deteriorating North American Electrical GridWhat was the most important technological development in the last 100 years for the advancement of human civilization and society? Perhaps the microchip, penicillin, the Internet, or...
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Interview with Professor Jeremy Siegel
Rüssel E. Palmer Professor of Finance, Wharton School of BusinessYER: I would like to ask you some questions regarding recent developments in the Fed's monetary policy - specifically, the latest round of quantitative easing (QE2). Do you expect QE2 to...
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Interview with David Darst
Chief Investment Strategist, Morgan Stanley Smith BarneyYER: First off on your fundamentals, you've long been recognized as a champion of diversification. How much of an obstacle has globalization posed to diversification and how do you get around this...
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Vol. 6, No. 2, Fall

Coffee and Calorie Posting:
MENU BOARDS IN Starbucks coffee shops around the country display essential information: how to order a skinny grande caramel frappuccino, (light whip, please). In New York City, these menus now also serve up the drinks' calorie information. Starbucks...
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Corporate Defaults
IN THE WAKE OF the supposed "worst recession since the Great Depression," credit markets are a hot topic in the financial world. In a very short time, America went from a place where nearly anyone could get a mortgage to one of carefully guarded capital...
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Gendered UNEMPLOYMENT
IT'S NO SECRET that the current recession has had a profound effect on American employment. Between December 2007 and October 2009, the national unemployment rate rose from 5.0% to crippling 10.1%. Not so apparent, though, are the vastly different ways...
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INCOME INEQUALITY United States and Germany
OVER THE LAST THIRTY YEARS, the United States has seen a rising gap between the rich and the poor. This increasingly unequal division of wealth, and the social stratification that follows, continues to be a contentious domestic issue. Rising income inequality...
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The Economics of School Vouchers
AS THE OBAMA ADMINISTRATION pours billions of dollars into education through the stimulus package, school districts around the country are angling to get a share. Each is trying to prove to Washington that their proposed reforms are worthy of federal...
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The Economics of Sleep for a College Student
WHILE MANY COLLEGE STUDENTS may feel that such a choice is inevitable, in the end, everyone needs some combination of all three. The issue is what quantity of each to choose. Every day, as students allocate their scarcest resource - time - between work,...
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Beggar Thy Neighbor
Consider China's position in 2009. As one of the world's largest and fastest growing economies, it reported in February that in one year, it had taken a staggering 25 percent drop in exports. Coming at the heart of the global financial crisis, this report...
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Pipeline Wars
A BRIEFING ON THE NABUCCO-SOUTH STREAM RIVALRY AND THE GEOPOLITICS OF NATURAL GAS IN EURASIANATURALGAS ROSE long ago to the status of a global energy commodity. Just as the introduction of oil in the first half of the 20th century had a profound impact...
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A Level Playing Field: Solving Economic Disparities in Major League Baseball
IN 2009, THE NEW YORK YANKEES replaced Yankee Stadium, a historic cathedral to baseball, with the New Yankee Stadium, a $2.3 billion cathedral to luxury. The fourth largest high definition screen in the world occupies the center field backdrop, directly...
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The Jane Austen Industry and LONG TAIL MARKETING
IN 1996, BRITISH NOVELIST Martin Amis noted that society was smitten with "Darcymania," a term he coined to describe the release of multiple Jane Austen film adaptations in the mid 1990s. Fourteen years later, it appears that the world is still in the...
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Guest Columnist: How the United States Is Helping Other Economies
(While Hurting Our Own)WHILE THE STATE of our economy has been depressed in the past two years by the subprime crisis, financial market turmoil and resulting high unemployment, some countries are enjoying good economic times. Recognized as a key component...
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Interview with Hal Varian
YER: We would like to cover three topics today: your work, the future of IT, and macroeconomic trends. Let's start with the obvious. You used to be a UC Berkeley Professor but you are now Google's Chief Economist. What are you working on day-to-day?VARIAN:...
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Interview with Professor Robert Barro
Undoubtedly one of the most influential economists of his generation^ Robert Barro has left his mark on every major area of macroeconomics. A leader of the rational expectations revolution in the 1970s y he questioned the effectiveness of active fiscal...
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Vol. 6, No. 1, Winter

Supply and Demand of College Admissions
IN RECENT YEARS, college admissions have become a hot topic in the national news, and for good reason. Competition intensifies each year as increasingly qualified and ambitious high school seniors vie for a limited number of spots. Those familiar with...
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Laffer Curve Revisited
INHERENT IN THE TAX-CUHlNG policies that have characterized supply-side economics in the United States and Europe is the theory diat increasing taxes does not necessarily increase tax revenue. As Arthur Laffer noted in 1974, "there are always two tax...
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A New Measure of ECONOMIC PERFORMANCE
IN FEBRUARY OF 2008, seven months before the fall of Lehman Brothers, French President Nicolas Sarkozy tasked Columbia's Joseph Stiglitz and Harvard's Amartya Sen with finding a measure of national economic performance superior to Gross Domestic Product...
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Does the Minimum Drinking Age SAVE LIVES?
IN THE EARLY 1 980s, researchers began to compare the rates of teen traffic fatalities in states with a drinking age of 21 versus those with one of 18. The resulting statistics startled legislators and prompted them to pass the Federal Uniform Drinking...
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The WTO in Theory & Practice
THE WORLD TRADE ORGANIZATION, like many multilaterally functioning institutions, has a storied history. In their recent working paper, "The WTO in Theory and Practice," Kyle Bagwell and Robert W Staiger, explain how the General Agreement on Tariffs and...
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Career Placement of Skilled Migrants in the U.S. Labor Market: A Dynamic Approach
AS A COUNTRY whose economic success has historically hinged on the work of foreign laborers, it is important to understand the situation facing current immigrants to the United States. Do immigrants with comparable skills, but from different countries,...
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The Coase Theorem
HOW MIGHT A POLLUTING factory and a neighbor negatively affected by this pollution settle their differences? According to Ronald Coase, the solution is deceptively simple: negotiate.Ronald Coase, an economist at the Universit)' of Chicago, proposed a...
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A Gilded Recovery? the Global Art Market after the Financial Crisis
WE ARE ALL FAMLIAR WITH the image of starving artists; even Michelangelo is known to have "slept in his clothes and boots." Van Gogh did not sel a single painting in his lifetime. Although Hollywood continues to perpetuate the image of starving artists,...
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The Education of an American Dreamer: HOW A SON OF GREEK IMMIGRANTS LEARNED HIS WAY FROM A NEBRASKA DINER TO WASHINGTON, WALL STREET, AND BEYOND
The Education of an American Dreamer: HOW A SON OF GREEK IMMIGRANTS LEARNED HIS WAY FROM A NEBRASKA DINER TO WASHINGTON, WALL STREET, AND BEYONDWHILE MANY YOUNG boys grow up wanting to be sports legends, doctors, lawyers or policemen, Pete Peterson grew...
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Portugal's Social Security System: The Efficacy of Reforms
ACROSS THE WORLD, millions of people depend on social security systems for their well-being. These programs need a regular inflow of money to support them, which often is a strain on government budgets. Concerns about the financial stability- of such...
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FOR SCIENCE AND PEACE: The Creation and Evolution of THE ANTARCTIC TREATY SYSTEM
A Model for International Cooperation and GovernanceTHE ANTARCTIC TREATY was signed fifty years ago on December 1, 1959. Since then, its governance model has adapted to meet new challenges, all the while maintaining the delicate balance necessary to...
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STRATEGIC VOTING over STRATEGIC PRINCIPLES
INTUITION SEEMS TO indicate that majority rule would be better than unanimity rule. Extremes do not matter in majority' rule, while in unanimity rule, one radical individual can dramatically alter the final outcome. Prior research on strategic voting...
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IN CANDY WE TRUST: Ditching the Pollster for Ghosts and Goblins
POLLSTERS SPEND MONTHS collecting data on voting trends and characteristics, trying to understand the whims of voters. Pundits and political experts argue incessanti)' about the preferences of LIS. citizens in national elections, unsure of how the public...
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MONEY TALKS: Information and Monetary Policy
DIRECT PUBLIC announcement and monetary policy are the two main ways for a central bank to transmit information about the economy to the public. But which mechanism can a central bank use to effectively communicate information about economic fundamentals...
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How Much Is Too Much? an Aristotelian View of Irrational Exuberance
IT USED TO BE THAT being a millionaire was a sign of having made it. However, in today's economy, joining the millionaire's club doesn't mean you will be quitting your job any time soon.In 2008, there were about 6.7 million US households with a million...
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Interview with Professor David Bach
DAVID BACH, Professor of Strategy and Economic Environment at Spain's Instituto de Empresa (IE) Business School, and Director of its Center on Nonmarket Strategy > has been included in Time Magazines 50 Thinkers of 2007 ranking as an "up and coming...
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Emerging from the Financial Crisis: AN INTERVIEW WITH NOBEL LAUREATE
THE ONGOING FINANCIAL CRISIS, with its devastating consequences for economics worldwide, has fundamentally altered public perceptions of financial markets. It has also triggered a renewed cycle of debate among economists regarding both the causes of...
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Vol. 5, No. 2, Summer

The the Roller - Coaster Ride at the Gas Pump the Roller -Coaster Ride at the Gas Pump the Roller-Coaster Ride at the Gas Pump Roller-Coaster Ride at the Gas Pump
ONLY HALF A YEAR ago, consumers were facing ever-increasing gasoline prices. With retail gasoline prices in the United States hovering above S4 to the gallon, understanding the determinants of gasoline prices was no longer considered an esoteric topic...
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A World of Wealth: HOW CAPITALISM TURNS PROFIT INTO PROGRESS
A World of Wealth: HOW CAPITALISM TURNS PROFIT INTO PROGRESSBY THOMAS G. DONLANIN THE UNITED STATES' economic world of government stimulus packages and Federal Reserve interventions, we rarely hear the words "free market capitalism" anymore. Americans...
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SELLING HEALTH: Adverse Effects of Pharmaceutical Marketing
THERE HAS ALWAYS SEEMED to be on inherent ethical conflict in advertising medications. Why should companies have to advertise their drugs? Shouldn't success come from the curing of patients rather than the creativity of an advertising executive? In their...
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SUCCESS AMONG THE ELITE: What Drives the Growth of Large Endowments?
FROM HEDGE FUNDS to investment banks, private equitv firms to university endowments, virtually no financial institution has emerged unscathed from the ongoing economic turbulence. While written before universities reported their disappointing year-end...
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Demystifying Private Equity
WHEN MOST people hear the term "investment", they think of stocks listed on the NewYork Stock Exchange, NASDAQ, and others. However, private equity funds - generally, limited partnerships that create a fund in which private firms and individuals of high...
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Immediate Gratification: Why the Developed World Ought to Save More
A 2008 STUDY undertaken by Loretti Dobrescu from the University of Venice, Laurence Kotlikoff from Boston University and Alberto Motta from the University of Padua entided "Why aren't developed countries saving?" provides evidence of a growing trend:...
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When Does Improving Health RAISE GDP?
CHRONIC ILL-HEALTH and the prospect of premature mortality haunt billions of people around the developing world. While working towards global health and stability few goals can be more worthy than that of lifting these burdens. But the question remains...
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New Methods of CREATING INDEXED PORTFOLIOS: Weighing the Possibilities of Creating Portfolios through Fundamental Indexing*
IT HAS BECOME widely accepted that most individual investors would improve their investment results if at least the core of their equity portfolios were comprised of low-cost index funds. That strategy is even recommended by legendary "active" portfolio...
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SECURING LAND RIGHTS FOR CHINESE FARMERS: A Leap Forward for Stability and Growth
THE CHINESE GOVERNMENT often boasts that one of its greatest achievements is feeding China's entire population, constituting 22 percent of the world's population, with only 9 percent of the world's arable land. That is indeed extraordinary considering...
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Critical Analysis: The Rmb's Exchange Value
IN 2005, CHINA ENDED its policy of maintaining a firm exchange rate for its currency, the renminbi (RMB). Instead of being pegged to the US dollar, the RMB was now going to be allowed to float with respect to a basket of currencies chosen by the Chinese...
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Political Media Coverage: Watchdogs with Bias-Tinted Glasses
EDMUND BURKE, in reference to the press gallery in the House of Commons after the French Revolution, once noted, "Yonder sits the Fourth Estate, and they are more important than them all." Two hundred years later, the impact of media coverage on issues...
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Stay in School: The Consequences of Graduating during a Recession
THE IMMEDIATE and intuitive effect on those graduating from college in a stagnating economy is obvious: they are less likely to be hired, especially for the most desirable jobs. However, how do those who graduate during a recession fare over the course...
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IN THE VIDEO RENTALS INDUSTRY: Positive or Negative?
FULL-LINE FORCING CONTRACTSCOORDINATING SUPPLY decisions between producers and retailers is challenging in markets where both firms separately maximize profits. Economists describe these markets as "vertically- separated" between upstream and downstream...
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MAINSTREAMING INCREASING RETURNS: Web 2.0, Copyright, & Intellectual Property Economics
IN THE AGE OF Facebook and Flickr, in the global mushrooming of the Web 2.0 battlefield, the world has shifted from material, product-oriented businesses to intellectual capital industries. In contrast to the usual physical production process, this proliferation...
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Michael Granoff Investing in Clean Technology
How did you get involved with Better Place?I came out of the investment world in 2006, and became convinced that electrification of transportation was both inevitable and very urgent. I began actively looking for a model that would address the need to...
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